In its first meeting in ten years, the Arab League announced that it a decided to reactivate the Arab economic boycott of Israel. In it final communiqué, the Arab League Summit, stated that the Arab leaders "demand the reactivation of the Arab boycott against Israel by holding regular boycott conferences which the Central Office of the Boycott

 Tertiary Boycott
Extends the boycott to companies doing business with boycotted
firms.

has called for with the aim of preventing dealing with Israel...The leaders decide...to continue to stop all steps towards, and activities of, regional economic cooperation with Israel. The leaders....firmly challenge Israeli attempts to infiltrate the Arab world in any form, and from now on to stop opening relations with Israel."
The leaders....firmly challenge Israeli attempts to infiltrate the Arab world in any form, and from now on to stop opening relations with Israel."

In recent months there were indications that after years of relative complacency on the boycott front that the Arab leadership and the Arab League were considering stepping up activity. The boycott was put on the agenda of the March 26, Arab League meeting in Amman, Jordan. According to media reports, in February of 2001, the Arab League's Central Office for the Boycott of Israel (OBI) sent invitations to its liaison officers regarding a meeting in Damascus on April 22, 2001.

From the inception, the Arab boycott has undoubtedly impaired Israel's economic growth, but it has never been able to thwart that growth altogether. While the actual cost is impossible to quantify, the Federation of Israeli Chambers of Commerce estimates that due to the boycott, Israel's annual exports were 10 percent smaller than might otherwise be expected.

Likewise, they calculated that foreign investment in Israel is approximately 10 percent less than might otherwise occur. Yet, bereft of natural resources and forced into economic isolation, Israel is a pioneer in the high-tech field, and has done far better economically than some of the countries that instituted the boycott. Despite the restrictions placed upon it, Israel grew into a technological power, with ties to many countries.

It remains unclear what the practical implications of the renewed boycott
threats will be. However, it is evident that despite Israel’s great effort to
reach peace with her Arab neighbors at the negotiating table, many Arab
countries and organizations continue to cling to the economic boycott as a mode
of warfare against the Jewish state.

Arab Economic Boycott of Israel: Background

Initiated in 1946 by the newly-formed League of Arab States, the Arab boycott
was decades-long economic warfare against the State of Israel.

At this time, two years before the establishment of the State of
Israel, the boycott was aimed at preventing the continued growth of Jewish
settlement in Mandate-era Palestine by boycotting the goods and services
produced by Jews in the region.

After Israel’s establishment in 1948, the Arab
League expanded the boycott in an effort to undermine Israel’s economic
viability. In 1951, the Arab League established a Central Boycott Office in
Damascus, Syria to coordinate Arab boycott activities.

Since the centralization in 1951, the Arab boycott operated on several
levels, targeting not only Israel, but also governments, companies,
organizations, and individuals around the world with ties to Israel.

The primary
boycott prohibited Arab peoples, states, and companies from buying from or
selling to Israel or Israelis, and made it illegal for Arabs to enter into
contracts with Israelis. This prohibition covered purchases of any goods,
services, or merchandise manufactured in Israel, and any products transshipped
through Israel. Thus, under the primary boycott, any commercial, financial, or
trade relations with Israelis were forbidden.

The secondary boycott
threatened companies and businesspeople worldwide with Arab economic retaliation
if they traded with Israel. Companies trading with or investing in Israel were
blacklisted, and subsequently found themselves boycotted by Arab companies and
governments.

The Arab League also imposed a tertiary boycott against
companies dealing with the blacklisted companies.

Perhaps the most damaging aspect of the Arab boycott was the chilling effect
of the unofficial voluntary boycott when companies independently avoided
doing business with Israel in anticipation of Arab retaliation. Many important
potential traders and investors were thus deterred from investing in the Israeli
market.

International Responses to the Boycott

The United States was the only nation in the world to adopt comprehensive
anti-boycott legislation. Since the late 1970’s, the United States
successfully enforced anti-boycott legislation prohibiting compliance by
American companies and individuals.

As a result of support from American Jewish
groups and many in the U.S. business community, the U.S. government has ensured
that Americans are not subject to foreign economic coercion. Furthermore,
boycotting countries have adjusted restrictive trade demands on American firms
to accommodate this U.S. policy.

Unlike the United States, response to the Arab boycott of Israel in Europe
and the Far East was ambivalent at best. In the 1970s, the European Economic
Community (EEC) included anti-boycott provisions in the EEC constitution and
anti-discrimination clauses in economic agreements with Arab states.

Despite
parliamentary debates in Great Britain, France, and the Netherlands, the EEC did
not have a record of enforcing these clauses. In the Far East, the impact of
the Arab boycott on Israeli relations with Japan and Korea was severe. Until
June 1998, no Japanese government minister had ever visited Israel. Likewise, in
South Korea, the depth of the compliance with the Arab boycott of Israel made
contact non-existent.

The Weakening of the Boycott

The boycott weakened through the 1980s due to the decline in Arab economic
power. The 1979 Egyptian-Israeli peace treaty also served to further lessen the
effects. After the Gulf War in 1991, many of the Arab states, yielding to U.S.
pressure, suspended the secondary boycott.

The greatest change occurred after the signing of the Israel-Palestinian
Declaration of Principles in September 1993, the start of the so-called
"Oslo process." While officially still in effect, since that time the
Arab boycott of Israel has had little impact.

On-going peace negotiations and a
strong Israeli economy encouraged a great influx of foreign investment in
Israel, and trade with Asia and Europe blossomed. There is little evidence that
companies continued to fear an Arab backlash for trading with Israel. At the
same time, some Israeli-Arab business relationships began.

To be sure some
boycott activity persisted. Most Arab nations continued to abide strictly by the
primary boycott and refuse to trade directly with Israel. Many Arab companies
still include a "boycott clause" in contracts with international
companies which provides for a cancellation of the contract if it is discovered
that goods being supplied originated in Israel, or even if the company has a
business relationship with Israel or Israelis.

Calls for Boycotts in Past Three Years

The threat of boycott, however, continues to be raised. While the Arab League
has been relatively inactive on the boycott, in recent years some American
Muslim and American Arab organizations have called for boycotts against
companies allegedly doing business beyond the Green Line or exhibiting Israeli
sympathies.

Several firms have been targeted.

Ben & Jerry's
Such campaigns have included a 1998 effort against Ben & Jerry’s
for a promotion on bottled water from the Golan Heights. The company ended the
promotion.

DisneyIn the autumn of 1999 Disney encountered intense pressure from
American Muslim and Arab groups, as well as from some Arab countries for an
Israeli-sponsored exhibit at its Millennium Village in Epcot. Disney agreed to
refer to Jerusalem as the "capital of the millennium" rather than the
"capital of Israel" as it had originally planned.

Burger KingIn September 2000,
the U.S. fast food company was threatened with a boycott for
American Muslim and Arab groups because its Israeli franchisee operated a
restaurant in the Jerusalem suburb of Maaleh Adumim, over the Green Line. Arab
leaders soon spoke out in support of the American-led campaign. Reportedly, the
Maaleh Adumim outlet continues to operate.

Estee LauderIn February 2001, American Muslim
groups called for a Muslim boycott of Estee Lauder cosmetics because of the
pro-Israel advocacy of a member of the Lauder family, Ronald Lauder.